Stocks Post First 2005 Gains

Stocks closed mostly higher Thursday, posting their first gains of 2005, as the nation's chain stores reported solid December sales and a rise in jobless claims calmed fears of a hawkish Federal Reserve.

The Dow Jones Industrial Average gained 25.05 points, or 0.2%, to 10,622.88, snapping a six-session, 225-point skid; and the S&P 500 added 4.15 points, or 0.3%, to 1187.89. The Nasdaq's 2004 slide stretched to four sessions, as the tech index lost 1.24 points, or 0.06%, to 2090, having briefly regained the 2100 level earlier. The 10-year Treasury bond was up 4/32 in price to yield 4.26%.

Volume on the NYSE was 1.57 billion shares, with advancers beating decliners by a ratio of 9 to 7. Volume on the Nasdaq was 2.17 billion shares, with decliners and advancers even.

"Today was a huge day for retailers, which started a positive tone in the market," said Brian Williamson, an equity trader with Boston Company Asset Management. "There's still a lack of conviction right now, which may change, but the move higher is encouraging."

The dollar was higher against the yen and euro for a fifth consecutive session. February crude closed sharply higher, up $2.17 to $45.56 a barrel, on signs OPEC members had followed through on an agreement to cut production in January. The Philadelphia Stock Exhange index rose 1.9% because of the spike.

Investors got some clarity on the holiday retail picture Thursday with the monthly release of chain-store sales reports. Wal-Mart ( WMT), Target ( TGT) and Kohl's ( KSS) all reported decent same-store growth for the month. Target and Kohl's were forced to lower earnings guidance, however, because of aggressive discounting. Target dropped 5.4% to $48.50 and Kohl's was off 2.2% to $47.02.

Wal-Mart said same-store sales rose by 3% in December, matching prior forecasts but falling short of last year's 4.3% increase. The retail giant expects January same-store sales growth of 2% to 4%. Total sales increased by 13% to $38.4 billion from a year ago. Shares gained 76 cents, or 1.4%, to $54.05.

The big story was specialty clothing retailers, most of which blew away Wall Street comp forecasts and saw their shares rise. American Eagle ( AEOS), Abercrombie & Fitch ( ANF), Hot Topic ( HOTT) and Chico's ( CHS) all rose sharply after wiping out sales estimates. Urban Outfitters ( URBN) also had a big month but saw its shares sink after last year's doubling.

Also falling were Sears ( S) and Pier 1 ( PIR), both of which reported disappointing December results. Pier 1 lost 39 cents, or 2.1%, to $18.36, while Sears dropped 50 cents, or 1%, to $49.90.

In economic news, the Labor Department said first-time U.S. unemployment claims jumped by 43,000 to 364,000 last week, the largest increase since March 2002. New claims are at their highest level since September. The less-volatile four-week moving average of new claims rose by 750 to 333,000. The Labor Department will release the December employment report Friday morning. The consensus forecast for nonfarm payrolls is a gain of 175,000, up from the 112,000 increase in November. The unemployment rate is forecast to remain at 5.4%.

"A lot of this week's action is a preamble to the report tomorrow," said Bryan Piskorowski, market analyst with Wachovia Securities. "The big problem is that it never comes in right near consensus, which is why it is a focal point. More emphasis is placed on it now after the Fed's minutes and the hawkish commentary, further putting the job numbers in the spotlight."

Western Wireless ( WWCA) shares surged Thursday on a report that Alltel ( AT) is close to a deal to buy the wireless communications company for about $4 billion. Shares gained $4.70, or 15.1%, to $35.70.

Among new research, American International Group ( AIG) was cut to hold at Deutsche Bank, while Computer Associates ( CA) was lowered to neutral by Merrill Lynch. Both brokerages cited recent run-ups in the companies' stock prices. AIG rose 11 cents, or 0.1%, to $67.46 while Computer Associates declined 59 cents, or 2%, to $28.75.

Smith Barney said negative broker views on Alcoa ( AA) are overdone, and that earnings momentum should pick up in 2005. Alcoa added 13 cents, or 0.4%, to $30.38.

TiVo ( TIVO) shares rose on news the company would team with Microsoft ( MSFT) for a new technology that would allow consumers to view digitally recorded television shows on handheld and portable devices. TiVo rose 39 cents, or 5.8%, to $5.80.

Ten former directors of WorldCom have agreed to pay $54 million to settle charges brought by bondholders in the company's accounting scandal, The Wall Street Journal reported Thursday. Of the total, about $18 million would come right from the directors, while liability insurance would cover the remainder. None of the former directors are on the board of MCI ( MCIP), WorldCom's Nasdaq-traded successor company. MCI gained 4 cents, or 0.2%, to $19.41.

National Semiconductor ( NSM) will cut 550 manufacturing jobs in an effort to streamline its operations. The company also was upgraded by Credit Suisse First Boston. Shares rose 19 cents, or 1.1%, to $17.07, but could not boost the Philadelphia Stock Exchange Semiconductor Index, which fell for the fourth straight day.